Japanese banks are coming clean about the depth of their bad debt problems, but investors seem to be sanguine about the slide into the red.

In the second week of the bank earnings season, four banks - the giant Mizuho, Chuo Mitsui, Sumitomo Mitsui and Mitsubishi Tokyo - on Monday admitted to heavy write-downs from their loan portfolios.

Bad loans/core bad loans at end Sept 2001 (bn yen)

Mizuho:
5,580/3,060

Yasuda Trust:
547.05/329.12

Sumitomo Mitsui:
3,330/2,220

Mizuho:
5,580/3,060

Mitsubishi Tokyo:
4,640/2,580

UFJ Group:
2,890/1,860

Asahi:
1,290/810.4

Daiwa:
898.79/439.09

Sumitomo Trust:
604.03/455.71

Chuo Mitsui:
925.8/413.5

NB: Core bad loans are those where the debtor is bankrupt or at risk of bankruptcy

Mizuho, which formed from three other institutions earlier this year, said its first half loss of 264.64bn ($2.14bn; £1.5bn) yen would grow to 720bn yen by the full year.

Its forecast of bad loan write-offs was doubled to more than 2,000bn yen, with 861.86bn coming in the six months to September 2001.

Mizuho's total burden of bad debts is 5,578bn yen, it said.

More losses

Chuo Mitsui - which was formed from the merger of Chuo Trust & Banking and Mitsui in April - also admitted to a loss for the first half of the financial year, the six months from April to September.

The bank said its net loss was 37.37bn yen, identifying 62.9bn yen in loan-loss charges to tidy up its bad debts.

But that still leaves 925.8bn yen in problem debt, up from 844.03bn announced in March, with 413.5bn yen owed by companies already bankrupt or on the verge of collapse.

Full year losses

As for Sumitomo Mitsui, the company said the six-month period had produced a slim profit of 34.2bn yen, down two-thirds on the previous year.

But the full year, the company warned, is likely to show a net loss of 150bn yen, a far cry from the 180bn yen profit it predicted in March of this year.

Its bad loan charges amounted to 305.4bn yen, after 819.1bn yen in year to March 2001.

For the full year to March 2002, the bank predicted that its charge could top 1,000bn yen, more than double what it previously thought.

Its total problem loan book came to 3,327bn yen, up from 2,820bn yen in March.

Mitsubishi Tokyo, though, said that while its half-year figures fell into a loss, it nonetheless expects to stay in the black for the full year.

In the six months to September, it lost 96.83bn yen after taking a bad-loan charge of 284.95bn yen on its 4,639bn yen of problem debts.

But that figures is just 100bn yen up on the position as of March.

The company is cutting 4-4,500 jobs by March next year, and slicing more than 25% off its dividend.

With half the country's top eight banks now having reported results, the total bad-loan charges for the industry stand at about 3,900bn yen, well above the 2,600bn they had earlier estimated.

Analysts fear that the true total could mount to as much as 6,000bn yen.

Market response

The banks all reported earnings after the markets in Tokyo had closed.

But during trading, investors had shown signs that the banks' current policies are gaining some support.

Mizuho shares were up more than 2.5% by the end of the day. Mitsubishi Tokyo shares rose about 0.67% during the day, and Chuo Mitsui rose sharply during trading - although late profit taking meant its stock closed down about 0.8%.